News of Note
CRA indicates that a nursing home is not, and a typical rooming house is, a “housing unit” for flipped property purposes
Email this ContentRegarding whether a nursing home or a rooming house was a flipped property, CRA first indicated that it considered that a “housing unit is normally represented by a room, or a group of rooms, used for residential purposes, occupied by a person or group of persons, and which includes a certain number of characteristics such as a kitchen, bathroom, etc.”, and that the term “housing unit” was restricted to single housing unit.
CRA then stated:
Although a nursing home may contain elements of a housing unit (such as a kitchen, bathrooms, etc.), it is our view that a nursing home would generally not be considered a flipped property.
It is unclear whether this is reflecting a view that a nursing home is a care rather than residential facility (see Blanche’s Home Care).
Turning to a rooming house, where individual rooms are rented out but the residents share a kitchen and bathroom facilities, it stated:
[W]e would generally consider the rooming house to be a property that is one housing unit for purposes of the flipped property rules – i.e., it is a room or group of rooms used for residential purposes, occupied by a person or group of persons, with a certain number of elements such as a kitchen, bathroom, etc.
Even if each bedroom went beyond basic furnishings to include a mini fridge, table and basic cooking setup such as a small stove or hot plate, CRA considered that such room would not constitute a housing unit, so that the property would not be excluded from “housing unit” status through having multiple housing units.
Neal Armstrong. Summary of 18 December 2025 External T.I. 2025-1055741E5 under s. 12(13)(a).
CRA indicates that shares designated under s. 7(1.31) are not excluded from being identical properties for superficial-loss purposes
On January 1, 2021, an employee acquired one share of the employer with an FMV of $60, resulting in a benefit under s. 7(1)(a) of $60. On December 1, 2021, the employee acquired three shares with an FMV and resulting benefit of $80 per share. On December 15, 2021, the employee sold three shares for $70 per share and, pursuant to s. 7(1.31), identified the three shares acquired on December 1 as those disposed of so that it had a capital loss of $30. On January 1, 2022, the employee acquired one share with an FMV and resulting benefit of $50.
In finding that the superficial loss rule applied to such loss, CRA noted that ss. 7(1.3) and 7(1.31) may dictate the ordering of dispositions, but do not deem identical properties to not be identical. Furthermore, s. 47(3)(b) (deeming securities to which s. 7(1.31) applied not to be identical for s. 47(1) cost-averaging purposes), did not apply for superficial loss purposes.
However, applying the longstanding CRA administrative formula (SL = (Least of S, P and B)/S x L)), even though the superficial loss under s. 40(2)(g)(i) was the full $30 loss, it was reduced under the formula to $20, i.e., the number of shares held at the end of the 61-day period was two-thirds of the number of shares disposed of.
Neal Armstrong. Summary of 20 October 2025 External T.I. 2023-0972451E5 under s. 7(1.31).
CRA finds that Reg. 5907(8)(a) is limited to mergers of what are already foreign affiliates of a corporation resident in Canada
A resident individual wholly owned Canco, and also wholly owned FA1 which wholly owned FA2.
In November of a particular year, FA1 and FA2 were merged, with FA1 as the survivor. Then, that December, the individual transferred all of the shares of FA1 to Canco on a s. 85(1) rollover basis.
In confirming that Reg. 5907(8)(a) would not apply in respect of that merger to deem the taxation years of the two FAs to terminate and (in the case of FA1) restart with the merger for surplus-computation purposes because, at the time of the merger, FA1 and FA2 were not yet foreign affiliates of Canco, the Directorate first noted, as relevant context, that Reg. “5907(8)(a) is relevant to the computation under subsection 5905(3) for the purpose of determining the various initial surpluses or deficits of the foreign affiliate resulting from the merger in relation to a corporation resident in Canada,” and then stated:
The grammatical and ordinary meaning of the words “foreign affiliate of a corporation resident in Canada” found in paragraph 5907(8), read in their specific context with regard to the purpose of the foreign affiliate regime and, in particular, taking into account the close link between that paragraph and subsection 5905(3), demonstrates that those words refer to a foreign corporation having that status in relation to a corporation resident in Canada immediately following the merger.
A textual, contextual and purposive interpretation of the provision does not reveal any elements supporting a conclusion that the terms of paragraph 5907(8)(a) could have retroactive effect where the status referred to in the provision is acquired at a time subsequent to the merger.
Neal Armstrong. Summary of 14 January 2026 Internal T.I. 2023-0990701I7 F under Reg. 5907(8)(a).
Income Tax Severed Letters 8 April 2026
This morning's release of four severed letters from the Income Tax Rulings Directorate is now available for your viewing.
CRA treats a Roth 403(b) plan as an EBP but states that withdrawals out of it could qualify for the Canada-US Treaty, Art. XVIII(1) exemption
The taxpayer and her spouse, who currently reside in the United States, will immigrate to Canada upon or after retirement. They will then begin withdrawing funds from their US 403(b) plan (and the underlying Roth 403(b) account), to which the taxpayer had made after-tax contributions and (in the case of the underlying Roth 403(b) account) her spouse had made both pre-tax and after-tax contributions.
CRA stated that it “generally consider[s] a 403(b) plan, including the Roth 403(b) account to be an EBP [employee benefit plan]”. On this basis, amounts received from the plan would be included in income under s. 6(1)(g), subject to the exclusion in s. 6(1)(g)(ii) for returns of employee contributions that have not been previously deducted.
CRA indicated that a “403(b) plan qualifies as a pension for purposes of Art. XVIII of the Treaty.” However, IRC s. 107 excludes a minister’s housing allowance from U.S. taxable income. Accordingly, distributions received from the 403(b) plan by a resident of Canada that were designated as a minister's housing allowance would not be taxable in Canada pursuant to the exclusion in Art. XVIII for amounts that would be excluded from US taxable income if received by a US resident.
Neal Armstrong. Summaries of 13 June 2023 External T.I. 2022-0952971E5 under s. 6(1)(g) and Treaties – Income Tax Conventions – Art. 18.
CRA confirms that a beneficiary receiving a return of the deceased RCA member’s non-deductible contributions cannot then generate the missing deduction under s. 60(t)
CRA confirmed that a member's contributions to a retirement compensation arrangement (RCA) that were not deductible under s. 8(1)(m.2) were not deductible under s. 60(t) by the member’s surviving spouse (or other beneficiary) who received such amounts from the RCA after the member's death and included them in income under s. 56(1)(z) or s. 70(3). This scenario did not satisfy the requirement that the deduction was only available to the taxpayer who had made the contributions (not the surviving spouse).
Neal Armstrong. Summary of 30 May 2025 External T.I. 2022-0931461E5 under s. 60(t).
CRA confirms that a “qualified clean hydrogen project” must be expected to be operational for at least 20 years
CRA confirmed that a “clean hydrogen project” cannot qualify as a “qualified clean hydrogen project” where it is expected to be operational for less than 20 years, given that the Guidance Document used by NRCan requires the use of cumulative data representing the first 20 years of operation of the clean hydrogen project in determining expected carbon intensity.
Neal Armstrong. Summary of 20 November 2025 External T.I. 2025-1078901E5 under s. 127.48(6)(n).
CRA indicates that the covered worker requirements extend to their installation of a concrete foundation to support substantial CCUS equipment
In order to support a substantial piece of equipment described in Class 57(a) in respect of a carbon capture utilization and storage (CCUS) project, Canco will construct a concrete foundation, including the excavation of a hole, the installation of pilings, and the pouring of concrete. The CRA found that this foundation would qualify under Class 57(f) as a structure, substantially all of which was used in the installation of Class 57(a) equipment, so that the foundation would itself be a specified property as defined in s. 127.46(1).
Accordingly, if Canco had elected to meet the labour requirements under s. 127.46(2) (e.g., meeting prevailing union rates) so as not to have the maximum ITC rates reduced, those labour requirements would extend to the above installation work for the foundation.
Neal Armstrong. Summary of 25 February 2026 External T.I. 2025-1081921E5 under Class 57(f) and s. 127.46(1) – covered worker – (a).
We have translated 5 more CRA interpretations
We have translated a further 5 CRA interpretations released in July and June of 1999. Their descriptors and links appear below.
These are additions to our set of 3,524 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 26 ½ years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).
Jewish National Fund - Federal Court of Appeal states that an allegation of CRA bias must be based on a tangible concern based on potentially credible evidence
The Jewish National Fund of Canada sought to set aside the Minister's decision to revoke its status as a registered charity, alleging inter alia that such decision was tainted by bias, relating to a weighty and illegitimate pressure campaign against it.
It moved for an order allowing its appeal on the basis that the Minister had disobeyed some of the search terms in the June 10, 2025 order of the Court, which required a supplementary search of CRA's records, including records of the Charities Directorate, to ensure the disclosure of, among other documents, any further materials within CRA's possession that were not included in the certified tribunal record and that were “in respect of the allegation that the Minister was biased,” including any “relevant material” in the possession of CRA “relating to communications from and to the public”.
Stratas JA indicated that the Court could make a search and production order where there is an “air of reality” to an allegation of maladministration, i.e., ”a tangible concern supported by some circumstantial or direct evidence” that is “capable of being believed” and there was proportionality, as assessed by the court, between the time, expense and court resources involved in carrying out the order and the importance of the matters at stake. He did not comment directly on the vagueness of the “materials … in respect of the allegation … [of] bias …” criterion in the order, but stated: “Regardless of whether it was issued in accordance with the principles set out in these reasons, it must be followed.”
Stratas JA found that the Minister's conduct (described below) did not warrant granting the appeal, as there was “no egregious conduct amounting to a serious abuse of process where no remedies will do”. However, the Fund persuaded him that the Minister had not fully complied with the Court's June 10, 2025 order:
- The Fund’s cross-examination of the CRA affiant indicated that she did not address a supplementary search request to any of the Tax and Charities Appeals Directorate, the Public Affairs Branch, the National Leads Centre, the Commissioner's Office, the Deputy Commissioner's Office, or the Minister's Office, and it was plausible that these departments might possess relevant documents.
- The Fund, in its prior motion for search and production, had referred to an email chain discussing a potential meeting between the Commissioner and another senior employee regarding the Fund's case. While the Minister had directed the participants in the chain to search for records of this meeting, no such request was made of the Commissioner or any other purported attendee of the meeting and it should now do so.
- The affiant testified that CRA's standard practices for searches had been followed but was unable to describe those practices or confirm that they had indeed been followed.
Accordingly, the Minister was ordered to conduct a further search for certain documents, confirm the adequacy of certain previous searches, and provide a further affidavit detailing the nature and scope of the searches conducted, with the Fund to be granted the opportunity to cross-examine on this affidavit.
Neal Armstrong. Summary of Jewish National Fund of Canada Inc. v. Canada (National Revenue), 2026 FCA 63 under Rule 317.
Neal H. Armstrong editor and contributor